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Investment credit rating
Study the unit: 'Unit 13. Investment credit rating' Globalisation ''Article to be read: '' The gated globe The forward march of globalisation has paused since the financial crisis, giving way to a more conditional, interventionist and nationalist model. Greg Ip examines the consequences. Oct 12th 2013 |From the print edition FIVE YEARS AGO George W. Bush gathered the leaders of the largest rich and developing countries in Washington for the first summit of the G20. In the face of the worst financial crisis since the Great Depression, the leaders promised not to repeat that era’s descent into economic isolationism, proclaiming their commitment to an open global economy and the rejection of protectionism. They succeeded only in part. Although they did not retreat into the extreme protectionism of the 1930s, the world economy has certainly become less open. After two decades in which people, capital and goods were moving ever more freely across borders, walls have been going up, albeit ones with gates. Governments increasingly pick and choose whom they trade with, what sort of capital they welcome and how much freedom they allow for doing business abroad. Virtually all countries still embrace the principles of international trade and investment. They want to enjoy the benefits of globalisation, but as much as possible they now also want to insulate themselves from its downsides, be they volatile capital flows or surging imports. Globalisation has clearly paused. A simple measure of trade intensity, world exports as a share of world GDP, rose steadily from 1986 to 2008 but has been flat since. Global capital flows, which in 2007 topped $11 trillion, amounted to barely a third of that figure last year. Cross-border direct investment is also well down on its 2007 peak. Much of this is cyclical. The recent crises and recessions in the rich world have subdued the animal spirits that drive international investment. But much of it is a matter of deliberate policy. In finance, for instance, where the ease of cross-border lending had made it possible for places like America and some southern European countries to run up ever larger current-account deficits, banks now face growing pressure to bolster domestic lending, raise capital and ring-fence foreign units. World leaders congratulate themselves on having avoided protectionism since the crisis, and on conventional measures they are right: according to the World Trade Organisation (WTO), explicit restrictions on imports have had hardly any impact on trade since 2008. But hidden protectionism is flourishing, often under the guise of export promotion or industrial policy. India, for example, imposes local-content requirements on government purchases of information and communications technology and solar-power equipment. Brazil, which a decade ago compelled its state-controlled oil giant, Petrobras, to buy more of its equipment from local companies, has been tightening restrictions steadily since. And both America and Europe imposed, or threatened to impose, tariffs on Chinese solar panels, alleging widespread government support. At the same time, though, Western countries themselves offer hefty subsidies for green energy at home. Capital controls, which were long viewed as a relic of a more regulated era, have regained respectability as a tool for stemming unwelcome inflows and outflows of hot money. When Brazil imposed a tax on inflows in 2009-10, it was careful to emphasise that not all foreign investment was unwelcome. “Nobody here is rejecting people that want to invest in our ports or our roads,” says Luiz Awazu Pereira, a deputy governor at the central bank. “But if you are here just because you are running an aggressive hedge fund and noticed that our Treasuries pay 10% while US Treasuries pay zero, this is a less desirable outcome.” The world has not given up on trade liberalisation, but it has shifted its focus from the multilateral WTO to regional and bilateral pacts. Months before Lehman Brothers failed in 2008, the WTO’s Doha trade talks collapsed in Geneva largely because India and China wanted bigger safeguards against agricultural imports than America felt able to accept. Shortly afterwards America joined talks to form what is now called the Trans-Pacific Partnership, which also includes Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. Barack Obama has held up the TPP as the sort of agreement China should aspire to join. The trend in foreign direct investment, too, is still towards liberalisation, but a tally by the UN Commission for Trade and Development shows that restrictions are increasing. Last December Canada allowed a Chinese state-owned enterprise to buy a Canadian oil-sands company, but suggested it would be the last. “When we say that Canada is open for business, we do not mean that Canada is for sale to foreign governments,” explained Stephen Harper, the prime minister. The flow of people between countries is also being managed more carefully than before the crisis. Borders have not been closed to immigrants, but admission criteria have been tightened. At the same time, however, many countries have made entry easier for scarce highly skilled workers and for entrepreneurs. Mr Obama sees globalisation not as something to be stopped but to be shaped in pursuit of broader goals. He wants other countries to raise their standards of labour, environmental and intellectual-property protection so that American companies will be able to compete on a level playing field and, perhaps, pay decent middle-class wages once again. When a clothing factory collapsed in Bangladesh in April, killing more than 1,000 people, Mr Obama suspended America’s preferential tariffs on many imports from Bangladesh until it improves workers’ rights. A clear pattern is beginning to emerge: more state intervention in the flow of money and goods, more regionalisation of trade as countries gravitate towards like-minded neighbours, and more friction as national self-interest wins out over international co-operation. Together, all this amounts to a new, gated kind of globalisation. A state of imperfection The appeal of gated globalisation is closely tied to state capitalism, which allowed China and the other big emerging markets—India, Brazil and Russia—to come through the crisis in much better shape than the rich world. They proudly proclaimed their brand of state capitalism as superior to the “Washington consensus” of open markets and minimal government that had prevailed before 2008. But the system also covered up structural flaws that are now becoming more obvious. In China, state-owned enterprises and state-directed lending have siphoned credit from the private sector and fuelled a property bubble. In India and Brazil, inadequate investment in infrastructure has resulted in rising inflation and sharply slowing growth. The globalisation in the West before 2008 certainly had its flaws. The belief that markets were self-regulating allowed staggering volumes of highly levered and opaque cross-border exposures to build up. When the crisis hit, first in America, then in Europe, the absence of barriers allowed it to spread instantly. Voters, who had never been keen on wide-open borders, took this badly, and support for anti-globalisation parties grew. A few constraints on global finance are not necessarily a bad thing. Limiting banks’ foreign-currency borrowing, as South Korea has done, makes them less likely to fail if the exchange rate falls. But gated globalisation also carries hidden costs. Policymakers routinely overestimate their ability to distinguish between good and bad capital, and between nurturing exports and innovation and rewarding entrenched interests. The opening up before the crisis had done wonders for channelling capital to the best investment opportunities, lowering prices for consumers and promoting competition. Interfering with this process reduces a country’s growth potential. This special report will seek to answer two big questions. Is gated globalisation merely a pause on the path to more openness, or is it here to stay? And is it, on balance, a good or a bad thing? The report will look at finance, capital controls, international trade and protectionism in turn to see how gated globalisation affects them for good or ill. Start with finance. 'Preparing for debates:' About this debate After the financial crisis of 2008, many feared the world would spiral down into the isolationism of the 1930s. It didn’t. Nonetheless, policymakers in many countries have rethought the benefits of unfettered globalisation. Regulators in Europe and America have sought to ring fence their banks against contagion from abroad. Emerging markets are experimenting with capital controls to manage hot money inflows. After multilateral trade talks fell apart in 2008, many countries put their liberalisation efforts into regional deals with like-minded neighbours, such as the Trans-Pacific Partnership. Big emerging markets like Brazil, Russia, India and China showcased a more interventionist approach to globalisation that relies on industrial policy and government-directed lending to give domestic sellers a leg up. Are these actions good or bad for globalisation? Do they suggest a pause in the progress of globalisation or the start of a backward drift? In short, is globalisation as a force for prosperity in trouble? 'The moderator's opening remarks' Our debate looks at the future of globalisation and asks whether it is in trouble. This is a harder question to answer than you may think. In the depths of the world financial crisis in 2008, the fear was that the world would relive the isolationist nightmare of the 1930s when tit-for-tat protectionism, symbolised most potently by America’s Smoot-Hawley Tariff Act, caused global trade to contract dramatically. That did not happen. Most countries have refrained from overt protectionism and respected the rulings of the World Trade Organisation. Not many countries have imposed across-the-board controls on capital outflows (Iceland and Cyprus are notable exceptions). Or look at the volume of world trade. It fell sharply relative to world GDP in 2008 but then bounced back. So by this simple metric, globalisation has not reversed. But one could equally argue that the fact trade is no longer growing faster than world GDP is troubling, especially since similar trends can be observed on direct investment and financial capital flows, which are both down notably from the 2008 peak. It is true that the world did not retreat into isolationism, but it has struggled to move forward on liberalisation. The Doha global trade talks have, until quite recently, looked moribund, replaced by efforts to liberalise along bilateral and regional lines. Capital controls have crept back in more respectable form as regulators and governments seek to limit the contagion from other countries’ financial troubles or monetary policies. So which is it? Is globalisation in trouble or doing fine? Our two panellists, Simon Evenett, a professor of international trade and development at the University of St Gallen in Switzerland, and Doug Irwin, a trade historian who teaches at Dartmouth College in America, answer this question in two different ways. Mr Evenett looks at the evidence and concludes that globalisation is in trouble. As co-ordinator for Global Trade Alert, a monitoring service run by the Centre for Economic Policy Research, he has raised alarms about hidden protectionism: actions that governments take that do not fit the customary definition of protectionism but nonetheless hurt the commercial interests of other countries. His outfit counts 2,441 beggar-thy-neighbour steps since November 2008, and of these, "less than 40% are traditional forms of protectionism. This time around the big economic players eschewed easy-to-spot across-the-board Smoot Hawley-style tariff increases; instead, they eased pressures on favoured firms by showering them with subsidies, tax breaks, government contracts and access to credit on easier terms." Mr Irwin, however, looks at the evidence and concludes that globalisation is alive and well. The policy impediments, he says, "have been largely piecemeal and ad hoc. They have not resulted in a significant closing of markets." It may be, he says, that the easy gains from globalisation from the opening of India and China "have been exhausted. Outsourcing and offshoring are no longer in vogue, as they were a decade ago. There is no problem with the world trade to GDP ratio remaining stuck at 30% for the foreseeable future, or even declining if driven by market forces." An important question then is whether globalisation, as a force, is a product of policy forces, market forces, or both. In the financial realm, both are at work. Investors and banks had good reason to pull back from foreign markets after being burned on exotica such as American subprime mortgage-backed securities. But those natural business pressures have been reinforced by regulatory pressures to limit national financial systems from spillover from foreign financial systems. This doesn’t mean that financial globalisation is over, or even in reverse; but it could mean that the era of great advances is over. Our two panellists, I hope, will peer into the future and tell us where they see these market and policy pressures taking globalisation a decade from now. The proposer's opening remarks Oct 16th 2013 | Simon J. Evenett Globalisation is in big trouble. While complacent politicians, executives and analysts put their faith in weak institutions, such as the World Trade Organisation, the opponents of open borders have been chipping away at the equal treatment principles that underpin the rich tapestry of modern commerce. Textbooks may emphasise tariffs and quotas, but that is just the tip of the iceberg of protectionism in the real world. What is at stake here are the living standards of millions of families whose breadwinners' jobs rely on being able to sell freely abroad or to others that meet foreign customers' needs. The world has moved on since Ricardo analysed the trade of wine and cloth between England and Portugal. The problem is that many commentators' mindsets on trade and protectionism have not. Nowadays, international commerce takes place in services as well as goods, and can involve the movement of ideas, investments and staff across borders. Crucially, as the types of global commerce have multiplied, so have the means available to governments to disadvantage foreign firms. You will not recognise many of those tools as standard trade policy. What matters is whether a policy treats domestic interests the same as foreign rivals—and as the crisis revealed, often this is not the case. Many means to hobble foreign competition are dressed up with excellent public relations. No one wants to eat unsafe food, for example, but are the tests used on imported food fair, scientifically based and open to challenge? The devil is almost always in the details and crafty protectionists know this. Worse, the language used by trade experts is heavily laden with jargon—and is a real turn-off to many. Governments' representatives have been toiling away at the UN on what they like to call non-tariff measures (another piece of ghastly gobbledygook) and cannot even agree on a serious definition. Since the onset of the global financial crisis much more information about government attempts to favour national commercial interests has come to light. Of the 2,441 beggar-thy-neighbour steps taken worldwide since November 2008, less than 40% are traditional forms of protectionism. This time around the big economic players eschewed easy-to-spot across-the-board Smoot Hawley-style tariff increases; instead, they eased pressures on favoured firms by showering them with subsidies, tax breaks, government contracts and access to credit on easier terms. For sure, the mix varied across countries and as the crisis evolved over time. Ultimately, the form of government favouritism morphed and less nimble analysts and journalists were left looking for protectionism in the wrong places. It seems that generals are not alone in fighting the last war. The threats to globalisation are real but should not be misunderstood. Globalisation isn't over, nor is protectionism new. Nor has anyone come up with a new, compelling intellectual case against integrating national economies into global markets. Yet the evidence is piling up that since the crisis began governments have resorted to a plethora of murky measures that tilt the playing field in domestic and foreign markets. That this protectionism took place despite the global architecture of trade rules and the spread of regional trade agreements over the past 20 years tells us that, ultimately, the battle for open markets will be not be won or lost in the salons of international conferences, but in national capitals. Given the national chauvinism on display in Washington, Beijing, New Delhi, Moscow, Brasilia and European capitals, what guarantees are there that during this era of rising economic rivalry, globalisation in its current form will survive? The opposition's opening remarks Oct 16th 2013 | Douglas Irwin Globalisation is alive and doing reasonably well. Despite bumps and blips in the world economy, the march of increased integration of markets around the world continues. While the pace of that integration may have slowed, the degree of integration is unlikely to reverse. As a check on where globalisation has been and where it might be going, look at the figure here from World Trade Organisation’s newly issued "World Trade Report 2013". In the 1990s and early 2000s there was an explosion in world trade. An increase in openness to trade in new emerging markets, led especially by trade reforms in India and China, helped push the ratio of world trade in goods and services to world GDP from about 20% to about 30%. http://media.economist.com/sites/default/files/debates/World_exports_to_world_GDP_large. Let us not forget that during this period there was a massive reduction in world poverty. Hundreds of millions of people in China and India could finally escape from a life of impoverishment and move into the ranks of the lower middle class. The world economy was then struck by the worst global financial crisis since the Great Depression. World trade contracted sharply in 2009, plunging 9% in a single year. Capital flows were also massively disrupted. We are still dealing with the awful consequences of this huge crisis. Yet fortunately, unlike in the 1930s, the world did not turn in a sharply protectionist direction. While Global Trade Alert has reminded us that the crisis saw the introduction of some protectionist measures, such as anti-dumping duties, producer subsidies and buy-local provisions, these policies have been largely piecemeal and ad hoc. They have not resulted in a significant closing of markets. Consequently, world trade quickly rebounded in 2010 and has been growing steadily ever since. In what sense could this globalisation be "in trouble"? Only if there was a serious prospect that this integration of markets could unravel and reverse itself. In contemplating this prospect, we should distinguish between globalisation driven by markets and globalisation driven by policy. The globalisation driven by market forces may be subsiding. It could be that the easy, initial gains from market opening in China, India and elsewhere have been exhausted. Outsourcing and offshoring are no longer in vogue, as they were a decade ago (to the fear of many), because costs have risen in the developing world. Instead, one hears about the return of manufacturing to America because of higher costs abroad and America’s low energy costs. But the rebalancing of economic activity around the world does not mean that globalisation is in trouble. There is no problem with the world trade to GDP ratio remaining stuck at 30% for the foreseeable future, or even declining if driven by market forces. A reversal of globalisation by government policies turning inward would be a different story. Yet we did not see this during the crisis; the backsliding was relatively modest. Public opinion did not demand protectionist policies. No one is protesting against the World Trade Organisation (remember the Battle of Seattle in 1999?) and the anti-globalisation crowd has moved on. The opening up of China, India and other developing countries is largely irreversible: the people of these countries have seen how trade has utterly transformed their economies for the better and they do not wish to see these gains reversed. Of course, the world is not moving in the direction of greater liberalisation. Policy is at a standstill. No one is protesting against the WTO because the WTO isn’t doing anything. The Doha Round is effectively dead. Regional trade negotiations are doing not much better. The Trans-Pacific Partnership negotiations face many hurdles and could stretch out for many years to come. The era of "hyper-globalisation", the rapid integration of the world’s economies in the 1990s and early 2000s driven by both markets and policy, may have hit diminishing returns. The globalisation process may take a breather. But does this mean that globalisation is in trouble? Hardly. As long as governments do not attempt to reduce the existing level of integration or interfere with existing trade flows, a high level of globalisation is here to stay. Representing the sides Defending the motion Simon J. Evenett ,Professor of International Trade and Economic Development, University of St Gallen Given the national chauvinism on display in Washington, Beijing, New Delhi, Moscow, Brasilia and European capitals, what guarantees are there that during this era of rising economic rivalry, globalisation in its current form will survive? Against the motion Douglas Irwin, Professor of economics, Dartmouth College As long as governments do not attempt to reduce the existing level of integration or interfere with existing trade flows, a high level of globalisation is here to stay. Closing statements Defending the motion Simon J. Evenett Professor of International Trade and Economic Development, University of St Gallen What future for globalisation? Douglas Irwin is optimistic—placing his faith in the huge strides made in recent decades in trade-boosting technological progress (eg, container ships, telecoms and the internet) and in stronger and tenacious business interests supporting open borders. I hope he's right, I really do. But Mr Irwin's argument implicitly reveals how much things have changed since the onset of the global financial crisis—and that is what bothers me. Let me explain. Before the global financial crisis, analysts pointed to ideas and institutions as underpinning globalisation, not just interests and innovation. Not any more. As for ideas, opposing global engagement through trade reform and the like pre-crisis put you in the dubious company of a few renegade academics, some marginalised UN agencies and one or two Latin American basket cases. With respect to institutions, ritual genuflection to the all-powerful World Trade Organisation and, in Europe, the awesome power of the European Commission were said to keep governments from meddling too much in markets. What a difference this crisis had made. For sure, governments have not turned completely inwards, as in the 1930s. But that has not stopped them from implementing all manner of commerce-distorting policies, many chosen deliberately to stay below the radar screen and to not openly antagonise trading partners. Open borders are about more than promoting trade; they are about undistorted trade. One indication of how much ground has been lost in the battle of ideas is that proposals for "industrial policy", a phrase that many mainstream analysts thought had been banished for good, are now discussed in the highest counsels in Anglo-Saxon countries. If the last few years were a victory for advocates of open borders, I shudder to think what defeat looks like. As for institutions, there cannot have been a worse five years for the rules-based trading system, currently embodied by the WTO. Even before the crisis, the WTO was losing credibility among heads of government as the Doha round talks dragged on. Remember that George Bush was overheard at the G8 summit in St Petersburg discussing the "Doha thing" as if it was an alien that had appeared from Mars. Presidents and prime ministers run a mile from failed initiatives. Matters got worse with crisis, as the WTO's reputation was hurt when the soaring rhetoric of a rules-based trading system collided with the harsh reality of crisis-era murky protectionism. Some leading analysts don't expect anything serious from the WTO before 2020. The WTO is destined for the fate of the UN Security Council: to have life breathed into it on those rare occasions when all the major powers agree that it is convenient to do so. If the WTO had a bad crisis, for the European Commission it has been purgatory. On paper the EU has the toughest rules on subsidies in the world. When the crisis struck, pressure from the leading EU member states forced the Commission to suspend those rules. So much for those who think that today's protectionism can be fixed by tougher binding international trade accords. When governments are desperate it is the rules that bend, not states. Optimists about globalisation take note. Instead of globalisation flying on four engines (ideas, institutions, interests and innovation) as it did before the crisis, now only two function. There are doubts about these as well, although they are less severe. While we should not underestimate the tenacity of those interests seeking to circumvent protectionism, as Mr Irwin suggests, it is not clear that their opponents are less cunning. The tug-of-war over protectionism has been going on for hundreds of years—and there is no guarantee that protectionists will not get the upper hand. As for innovation, few stop to ask how much the incentives to create the next generation of trade-boosting improvements will be undermined if firms downgrade their expectations about access to foreign markets in the first place. What may have been a virtuous cycle in the past can go the other way. For sure, containerisation isn't going away, but what might have been? Dark clouds loom over globalisation, at least as far the level playing field is concerned. Don't be fooled by the "mega" transpacific and transatlantic trade deals being negotiated. They will be packaged as breakthroughs, opening markets, etc. In fact, most likely they will deliver little. Too much faith is being put in such third-order economic policy, just as the WTO's merits were oversold. The reality is that the battle for nationality-blind economic policies will be decided in national capitals—and there are plenty of grounds for concern. Against the motion Douglas Irwin Professor of economics, Dartmouth College In our debate, Simon Evenett and I have focused largely on trade policy, our area of expertise. We both start with the presumption that an open trading system is a "good thing" but we disagree on how much it has been eroded by government policies taken during and after the recent crisis. A number of commentators to this debate have rejected the question "is globalisation in trouble?" as being vague and not well defined. I would agree with these commentators that globalisation is a broad, multifaceted phenomenon, making it difficult to grapple with in this brief forum. There is no doubt that we have left many issues untouched. For example, many of the comments have focused on the problems of a globalised financial system. Indeed, it is worth pointing out that the case for free trade in goods and services is not the same as the case for free capital mobility. The economic risks involved in having large amounts of short-term capital moving quickly around the global financial system are much greater than any adjustment problems associated with growing world trade. In fact, Jagdish Bhagwati, a distinguished economist, made precisely this point in his famous 1998 piece in Foreign Affairs entitled "The Capital Myth: The Difference between Trade in Widgets and Dollars". The question of the proper regulation of short-term international capital flows would be a useful one for a future Economist debate. But I would like to comment on a point Mr Evenett made in the last paragraph of his rebuttal, where he said: "Globalisation was always much more than rising cross-border flows of commerce. Underpinning it was the idea that competition on merit, rather than nationality, delivered a wide array of benefits. The global economic crisis and its aftermath have revealed that among decision-makers this idea is under siege. It is in this sense that globalisation is in big trouble." This is a critical point: even if the aggregate importance of the small but numerous trade interventions of today can be debated, the current system is in danger if the idea of economic nationalism takes root and begins a movement away from the relatively open commerce the world enjoys today. http://media.economist.com/sites/default/files/pdfs/Global_Irwin_closing. One piece of evidence on this is public opinion around the world. As the chart shows, public opinion, with some important variation by country, still supports the idea that free markets are the best economic system. Globalisation would be in trouble if the public began to support populist programmes of government nationalisation and price regulation seen in countries such as Venezuela under Hugo Chávez and to a lesser extent elsewhere. Fortunately, most people do not seem to conflate a system of free and open competition with "crony capitalism", but in fact understand that it is the opposite. While special interests seeking protection from foreign competition will always have some success with government, I still believe that a significant retreat from globalisation will not happen as long as public opinion remains broadly supportive of the market economy The moderator's closing remarks Oct 24th 2013 | Greg Ip Simon Evenett usefully reminds us that globalisation is driven by ideas, institutions, interests and innovation. Doug Irwin convincingly demonstrates that at least two of those, interests and innovation, remain powerful drivers of globalisation. America's protectionist backlash against China is much more muted than it was against Japan 30 years ago because American companies have invested more in China than they did in Japan, and thus have more to lose from a trade war. The integration of global supply chains means protectionist actions do more collateral damage. A German solar power company in America was a leading proponent of tariffs on Chinese imports, but Germany itself opposed European tariffs on Chinese imports because of the higher cost German power producers would have to pay. Meanwhile, innovation—as it always has—opens up more of the world to commerce. E-books, games and consulting services can now be sold around the world over the Internet. Of course, innovation sometimes pushes in the other direction; 3D printing makes possible small, localised production that might otherwise have been outsourced. Whether globalisation is in trouble will be decided in the arenas of ideas and institutions. I side with Mr Evenett in agreeing that the ideals of globalisation have taken a step back since 2008. The world has not closed its borders; rather, I use the term "gated globalisation" to describe countries' buffet-style approach to picking those bits of the world they want to interact with. This is most obvious in finance. As Mr Irwin notes, financial globalisation does not enjoy the same intellectual respectability that globalisation in goods and services does. But that does not mean financial protectionism is intrinsically good. National regulators are right to manage foreign banks more tightly, but in the process they limit the competition for their citizens' business. Capital controls may ultimately divert financial flows into less productive, more opaque channels. As for institutions, I wouldn't go so far as Mr Evenett as to say the WTO has "had a bad crisis." On dispute resolution, it is working well. But it has certainly lost its role as the leading vehicle for trade liberalisation. While it's encouraging that a modest deal on customs facilitation could be agreed in Bali in December, the real action is elsewhere. Canada and the European Union have just inked a pact covering intellectual property, investment, professional certification and government procurement. Progress on these frontiers of liberalisation at the WTO has been slow to non-existent. As commenter Anjin-San wrote, "the rise of regional free-trade blocks such as NAFTA, EU, and the TPP … can be interpreted as either a stepping stone to global free trade, OR as the Block Economy 2.0. If one takes the former view, then Globalization is NOT in trouble. If one takes the latter view though, then Globalization is doomed." Globalisation is not doomed, but it is moving at different speeds, depending on the sector and the country. The EU, Canada, the United States, Mexico and other like-minded economies are pressing forward while many emerging markets such as Brazil, India and Indonesia hang back and Russia heads in reverse, creating by threat and bribe a customs union that will turn it, and its neighbours, inward. In Latin America, countries are either aligning with the liberal Pacific Alliance or the interventionist Mercosur. China is somewhere in between. Its new leadership has made symbolically important gestures towards opening up, such as the creation of the Shanghai Free Trade Zone. But dig a little deeper and these gestures have yet to translate into significantly greater freedom for foreign companies. China will screen foreign investment in the Shanghai FTZ via a "negative list"; anything not on the list is permitted, an improvement from its prior "positive list" approach under which anything not on the list was prohibited. But the initial negative list contains over 1,000 banned areas, suggesting that as a practical matter, life won't be any easier than it was before. We simply don't know at this point whether the encouraging gestures of the Chinese leadership will change life on the ground for foreign companies, which has become steadily more difficult over the last five years. Ultimately, I am optimistic. The virtues of globalisation may escape some national leaders, but not their economies. It can't be coincidence that the countries most nationalistic in their economic models—Russia, Brazil, India, Turkey, and Indonesia—have seen their economies and financial markets suffer most in the last year. Industrial policy, state capitalism, state-directed lending and protectionism distracted from, and at times undermined, more essential priorities such as reducing barriers to private (including foreign) investment and the improvement of public services and infrastructure. The mass public demonstrations that erupted in many of these countries were a repudiation, albeit an inchoate one, of these failed policies. What will voters ask for next? They could, of course, vote for even more nationalist, protectionist policies as we see a growing share of voters in Europe do. But perhaps, as we have seen in Japan, they will do the opposite and decide to give reformers, and globalisation, a chance. GLOBALISATION ''' A List of Vocabulary (to ease your understanding) '''PART 1 About this debate &The moderator's opening remarks PART 2 The proposer's & opposition's opening remarks 'PART 3 Closing statements '